Pension investors must accept that risks within the alternatives space are no longer being adequately compensated, but should nevertheless continue to invest in such asset classes, according to the chairman of the board at Germany NSN Pension Trust.

Speaking at an event for institutional investors in Vienna last week, Thomas Friese said the “bitter pill” of lower returns needed to be swallowed.

“Also, in the alternatives space, the best times are behind us,” Friese added, but nevertheless stressing it remained “important to be invested in this segment”, even where investors were not being adequately compensated for the associated risks.

At the end of 2015, NSN Pension Trust, the former pension fund for Nokia-Siemens Networks and now responsible for pensions for Nokia’s German staff, had allocated approximately 20% of its €1bn in assets to alternative investments.

On the same panel, Hubertus Theile-Ochel, managing partner at Munich-based alternatives boutique Golding Capital Partners, urged investors to make alternatives part of their strategic asset allocation, “even if it is just a small allocation to start their learning process”.

He urged a change in the way fees were charged when investing in alternatives, suggesting fees based on actual invested capital rather than on committed capital were the solution.

However, Marcus Klug, CIO at Austria’s Bundespensionskasse, the pension fund for civil servants, pointed out he was “looking at alternatives much more opportunistically”, rather than allocating a fixed sum annually.

“We are waiting for the right investment to [come along]”, he noted, adding that alternatives were a “very broad area which cannot be thrown into one basket”.

Currently, the €700m Bundespensionskasse, mandatory for most civil servants who started work after 1999, has a 12% share of alternatives.

Dietmar Lehmann, CIO at Germany’s €3bn VolkswagenStiftung, which is run independently of the carmaker, told delegates he was “rather sobered and disillusioned by active management”.

He explained his dissatisfaction by saying: “There is always one excuse or another why the strategies did not work in the end.”

He added that a renewed attempt by the foundation employing active management in the small-caps segment was failing, even after a change of manager.

Lehmann said: “We have swapped the manager after three years, but the new one is also not living up to expectations a year after hiring.”